Long Term Investing, Is It Dead?
Does long term investing still work? Over the last few years there have been many ups and downs and this has lead some people to believe that long term investing is dead. So is it? Does investing into a diversified portfolio still work over the long term?
Of course long term investing is still valid. Over the long term stocks tend to go up, just because the last couple of years have been crazy does not mean that it will continue to be that way in the future. All the evidence seems to say that over the long term, stocks go up and become very profitable.
1. Lots of Flat Times
People seems to be pretty eager to say something like, “we have been trending sideways for 5 years, looks like buy and hold is dead” Which if you look at the history of the stock market there have been plenty of times when stocks have been trending sideways for many years on end.
The investors who made money during sideways trends where those who simply looked for good investments and hung onto them until the market finally broke out of its sideways trend and went up.
2. History Looks Good
Aside from buying at the top of the great depression, there was no other time where you could have bought stocks, hold them for 20 years, and not have a decent overall return. Even if you bought at the top right before the great depression you could have still made money if you had held onto it long enough.
3. Dividend Stocks
If you do take a look at the long term charts of the major indexes you still do not see the whole story. Many stocks also pay out a consistent cash flow to their investors in the form of dividends. These can make stocks a better investment than CDs and Bonds even in flat markets.
The stock market has been a pretty profitable way to make money over the long term in the past. But who knows what will happen in the future. In the end you always take risks by investing into stocks, but those risks would have worked out in the past.
For more on the Dow Jones Industrial Average History and it’s returns or for more information on how the stock market has done over the long term visit this Stock Market Historical Graph page.
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